Government is Making Daycare Unaffordable

Most economists agree that ethanol-support programs are driving up the prices of food and gas. Many would also agree that federally subsidized student loans are driving up the cost of college. Yet, there are some activists complaining that government must do more.

Unfortunately for families with children, government already does do more.

In a recent report, the Child Care Aware made the argument that government help is needed so parents can afford daycare. The report noted that child care now costs more than rent does in many parts of the country.

While the costs of daycare are high, government spending on daycare is also high. Federal spending totals more than $10 billion a year, and state governments add billions more. All told, it is estimated that government subsidies account for about 40 percent of all daycare expenditures in the country.

Government programs that help some parents pay for daycare are functioning exactly as the laws of economics would predict — government spending pushes prices higher. Even President Barack Obama admitted this law of economics when he announced recently that the government would be buying $170 million worth of meat in order to keep prices high so farmers can benefit.

The impact of government on the daycare market is confirmed by the reality that the highest daycare costs are found in Washington, D.C. The federal government is the largest employer in the nation’s capital. Income is above average, and many government agencies have benefits programs that help employees pay for daycare.

To meet the demands of vocal constituencies, government subsidies are directed into some markets and the result is always the same. Government spending and prices seem to go up together.